DONALD RUSSELL, Circuit Judge:
This is an interlocutory appeal, pursuant to Rule 54(b), Fed.R.Civ.P., from an order denying class certification under Rule 23(b)(3), Fed.R.Civ.P., in a private action brought by certain South Carolina tobacco growers, who allege that the defendant tobacco companies and the Secretary of Agriculture violated Sections 1 and 2 of the Sherman Anti-Trust Act
This action concerns the sale at auction of flue-cured tobacco on the South Carolina markets. Flue-cured tobacco is a non-standardized or non-fungible commodity. It is raised in the Pee Dee section of South Carolina. Under a long established pattern of marketing, it is sold, when ready for market, at auctions conducted at some 36 warehouses in 11 geographic markets distributed throughout that section. All tobacco, before being offered for sale at auction, must be graded by government inspectors for the information of both sellers and buyers. These inspectors classify the tobacco within the range of 161 grades, depending upon the location of the leaf on the tobacco stalk, beginning with the top of the plant. Every buyer, however, has his own grading system. His classifications of grades are considerably
All tobacco is grouped, according to government grades, in individual piles weighing approximately 200 pounds each, and is offered for sale by an auctioneer at competitive bidding. The warehouses where the tobacco is brought, graded and sold are owned by independent individuals or concerns having no connection with the defendants. The auctioneer at the sales is employed by the warehouses and likewise has no connection with the defendants. Under the established procedure for bidding, a representative of the warehouse (known as a "starter") begins the bidding as each pile is offered for sale at the warehouse and the auctioneer proceeds from that point to receive bids in the normal auction manner from the prospective buyers present at the sale.
The defendants are buyers of flue-cured tobacco. Some purchase tobacco at all of the warehouses in the several South Carolina markets; others participate in the sales at only some of such markets and warehouses. There are other buyers than the defendants who are present and bidding at some or all of the South Carolina markets.
The prices which prevail at the auctions vary from day to day and are not uniform, even for tobacco which may be graded alike by government inspectors. Normally, these prices increase as the season progresses. To some extent this is because the early marketing generally consists of the lower grades commanding lower prices. As the marketing season continues, the grades generally increase in quality and market demand. Because of short supply, the price range between the lower and higher grades, however, had narrowed in the 1970's, which is the period involved in this lawsuit. Thus, in 1970, the average price on the South Carolina markets was 71.88 cents per pound; in 1974 it was 103.96 cents.
Just as there is a variation in price from market to market, from day to day, and from governmental grade to governmental grade, and even among grades, during a season, so there may be a considerable variation in the governmental grades for which the various buyers compete and in the quantities purchased by the different buyers from day to day on the various markets. Some buyers, for instance, do not bid on certain grades, because their principals do not use such grades in their processing, or they may already have purchased as much as they wish of those grades at that particular market. In such cases, the buyers either withdraw from the bidding or sharply curtail their bidding. An illustration of this situation is the experience at the Pamplico market during the marketing season of 1973. One of the defendants did not buy any tobacco at this market in 1973; another did not buy during a quarter of the sales days at such market in this period. A further indication of the fluctuations in purchases at this market is evidenced by the record of purchases during this same 1973 season by the defendant Reynolds at this market. Its percentage of purchases, on a daily basis, fluctuated widely between 1 per cent and 27 per cent of the sales. It is interesting, too, that the largest buyer at the market during that season, is not a defendant in this action.
At the bidding, it was not infrequent that the warehouseman would intervene to bid up the price of a particular pile of tobacco. He would do this to "stabilize" the market, as one warehouseman phrased it, that is, to stimulate the bidding. Should a seller, on the other hand, feel that his tobacco was being sold too cheaply he could withdraw it from sale and later reoffer it or put it under the support loan program to the Stabilization Fund, operated under the authorization of § 1445, 7 U.S.C. From time to time, the bidding for a particular pile of tobacco, particularly if of high quality, would end with a tie-bid from two or more of the buyers. Occasionally, this tie-bid might be broken by another buyer, who would intervene with a higher bid. More often, though, the auctioneer would, in case the tie was not broken, make a choice between the bidders and award the tobacco to one of the tie-bidders. In selecting the
In their complaint seeking both individual and class relief, the plaintiffs set forth three separate causes of action under the anti-trust laws: The first asserted a conspiracy of the defendant companies, "with the knowledge, consent and acquiescence" of the Secretary of Agriculture to fix prices and rig bids on flue-cured tobacco at the South Carolina tobacco auction markets; the second, a conspiracy of the defendant companies, "with the knowledge, consent and acquiescence" of the Secretary of Agriculture, to monopolize these same markets by percentage purchase agreements and collusive bidding; and, finally, in conjunction with the Secretary of Agriculture, a conspiracy "to fix, control, and restrict" unreasonably "the amount of flue-cured tobacco which could be sold per day and per week in the auction warehouses," primarily by an inequitable assignment of inspectors to such warehouses as opposed to those assigned to warehouses in the Georgia market. To this complaint, all parties filed answers. In addition, the Secretary of Agriculture moved to dismiss but the motion was denied.
After joinder of issues, the plaintiffs moved to certify the action as a class action under Rule 23. Before passing on the certification issue, the district judge permitted full discovery on that issue alone, presided at the depositions of more than twenty witnesses heard during that discovery, and examined extensive documentary evidence produced.
Primarily, the decision of the district judge turned upon a finding of the unmanageability of the action as a class action considered under the requirements of Rule 23(b)(3). In any review of either a grant or denial of class certification on grounds of manageability under Rule 23(b)(3), we must begin by recognizing the firmly established principle that the issue of manageability of a proposed class action is always a matter of "justifiable and serious" concern for the trial court and peculiarly within its discretion.
It must be borne in mind, too, that there are three essential elements in every private anti-trust action: They are (1) a violation of the anti-trust law, (2) direct injury to the plaintiff from such violations, and (3) damages sustained by the plaintiff.
Generalized or class-wide proof of damages in a private anti-trust action would, in addition, contravene the mandate of the Rules Enabling Act
As we have already stated, the district judge carefully and thoughtfully reviewed the facts and concluded that the issue of anti-trust violation did not predominate, that class action treatment was not superior to other available remedies in the case and, under the required standards of proof of the plaintiffs' action, class certification would render it unmanageable. He referred to the multiplicity of claimants who might be involved, the complexity of their claims as they would relate to injury and damages, and the highly individualized character the proof of injury and damages would assume, making necessary a mini-trial in all the individual claims, probably with a separate jury. He noted the numerous potential parties that might be injected into the action by class certification. Parties to whom notice would have to be given if class certification were allowed would, it seems, be above 20,000. The sheer cost of preparing a list of these potential parties was estimated at $30,000. The claims of the parties would involve thousands upon thousands of sales during four separate annual marketing seasons. Moreover, the claims could not be proved by any set method of mathematical or formula calculation but would require individual proof and trial, necessitating the examination of countless invoices, warehouse records, etc. In some cases, the calculation might be complicated, the district judge found, by the need to
The plaintiffs argue, however, that the district judge was "plainly wrong" in his denial of certification on the ground of manageability. In support, they assert that he rested his findings substantially on the difficulties of establishing injury and damages. Such a ground, in their view, will not justify a denial of class certification. There is no question, as they contend, that there are authorities which at least in result support this view.
Plaintiffs answer by declaring that they "expect" to develop a formula, which will simplify the computation of individual damages, at some later point in the litigation. Concededly, a district court should not decline to certify a class because it fears that insurmountable problems may later appear.
Plaintiffs suggest another procedure which they contend would obviate the necessity of individualized proof of the fact and amount of damages. They argue that any difficulties created by that problem could be minimized by the simple expedient of bifurcating the trial, trying first
Nor, as the district judge held, can the difficulties inherent in proving individual damages be avoided by the use of a form of "fluid recovery." Such a method of computing damages in a class action has been appropriately branded as "illegal, inadmissible as a solution of the manageability problems of class actions and wholly improper."
BUTZNER, Circuit Judge, dissenting:
I dissent for the reasons stated in the opinion Judge Wyzanski wrote for the panel in Windham v. American Brands, Inc., 539 F.2d 1016 (4th Cir. 1976).
This is inaccurate insofar as it suggests that the auctioneer makes his allocation pursuant to any conspiracy. As we have said, the record is clear and conceded by the parties that the auctioneer acts with complete impartiality and without any agreement with any defendant in choosing the successful bidder in connection with tied bids.
See, also, Neely v. United States (3d Cir. 1976), 546 F.2d 1059, 1071:
The panel opinion stated that there was "almost a rebuttable presumption" in favor of class action treatment for anti-trust suits. 539 F.2d at 1021. This rule, if adopted, would operate to remove the burden of establishing right to class action treatment from the plaintiff in an anti-trust suit and impose it on the defendant or defendants. This would place anti-trust suits in a preferred position over even plaintiffs in discrimination cases. Cf., East Texas Motor Freight System, Inc. v. Rodriguez (1977), 431 U.S. 395, 398-401, 97 S.Ct. 1891, 1894-1895, 52 L.Ed.2d 453. We do not find this proposed rule supported by either authority or reason and do not adopt it. For a criticism of this panel ruling, see, 62 Cornell L.Rev. at 195-99.
See, also, ibid. 27 Syracuse L.Rev. at 1261, n. 26: "Predominance and superiority are considered jointly in assessing the manageability of actions under rule 23(b)(3)."
To that effect: Barnett v. W. T. Grant Company (4th Cir. 1975), 518 F.2d 543, 547; Cypress v. Newport News General & Nonsectarian Hosp. Ass'n (4th Cir. 1967), 375 F.2d 648, 653. And see Frankel, Some Preliminary Observations Concerning Civil Rule 23, 43 F.R.D. 39 (1967):
See Note, Developments, supra, at 1513 and Practicing Law Institute, Current Problems in Federal Civil Practice, 491 (1975):
State of Illinois v. Harper & Row Publishers, Inc. (N.D.Ill.1969), 301 F.Supp. 484, 489, aff'd by equally divided court, 400 U.S. 348, 91 S.Ct. 479, 27 L.Ed.2d 433 (1971), reh. denied, 401 U.S. 950, 91 S.Ct. 917, 28 L.Ed.2d 234, is an excellent illustration of this principle. In certifying the action for class treatment, the Court said:
In Blackie v. Barrack, supra, 524 F.2d at 905, in finding that liability predominates over causation or damages, the Court said that "the process of computing individual damages will be virtually a mechanical task."
See, also, Note, 27 Syracuse L.Rev. at 1263-4:
Kline v. Coldwell, Banker & Co., supra, 508 F.2d at 238 (Duniway, J., concurring):
Accordingly standing has always been assessed on the basis of the plaintiff's right to recover, that is, on both liability and injury.
Taken to its extreme, the rule, as proposed in the panel opinion would in effect make class certification well nigh automatic. Taken to its extreme, a strict application of standing in determining right to severance, on the other hand, would result in an almost uniform rule against class certification. We recognize that there is some merit in both views but we believe that neither should be regarded as an absolute rule but the facts in each case should be carefully weighed and, after considering all aspects of the case, including the issues of injury and damages as well as of violation, the determination of class certification vel non should be made. And this decision should be made by the district judge, who has the greatest familiarity with the complexities of the case. His determination should only be reversed for clear error. This is the principle we apply in deciding this case and it is the one we believe to be the better practice to follow.
And see In re Sugar Antitrust Litigation, supra, 73 F.R.D. at 351:
See, also Link v. Mercedes-Benz of N. Am., Inc., supra 550 at 877; and Practicing Law Institute, Current Problems in Federal Civil Practice, 491-94 (1975).